A Short Guide To Day Trading Penny Stocks

| September 24, 2014 | 0 Comments

penny stock tradingPenny Stocks And Quick Money

There is perhaps no better way to make quick money than penny stock trading.

And there’s a reason so many people are hooked on day trading: it works (if done correctly, that is).

Let’s look at what penny stock day trading is and how to be successful at it from day one.

A Primer On Day Trading Penny Stocks

Day trading is exactly as it sounds.

An investor buys and sells shares of a stock within the same day with the intentions of making quick returns and avoiding major losses.

Because it’s so contrary to many of Wall Street’s slow, steady, long-term investment strategies, it tends to get a bad rap in the world of finance.

However, despite the backlash from opponents, experienced day traders understand the potential payoffs.

This is particularly true when day trading penny stocks. Not only can you make quick returns, but you can make large returns.

How Day Trading Penny Stocks Works

In its most simple form, day trading requires five steps:

  1. Research -Step one is arguably the most important step in the process. It’s the foundation for the rest of the day and requires careful attention to detail. During the research phase, you compile a list of penny stocks you believe have the opportunity for high growth during that day. In the beginning stages, you may find it hard to perform effective research, but over time, your ability to spot trends and find reliable sources of information will improve.
  1. Study the market -Next, take a look at the recent trends. For penny stocks, it’s less about analyzing the overall market and more about researching individual stocks on your list. The high-volatility nature of penny stocks means each stock moves to its own tune.
  1. Place your orders -The third step involves placing your order – preferably early in the day. However, this step operates on a rolling basis throughout the trade. If a stock on your list is higher than you’re willing to pay, be patient and wait for it to drop into your comfort zone.
  1. Sell your shares -Once your shares have reached your target price, it’s time to sell. This could happen after 20 minutes or eight hours – it just depends on how the stock performs.
  1. Continue with your day -Once you sell your shares and profit, you’re free to get on with the rest of your day. Some penny stock investors prefer to get away from the computer and do other things, while other investors spend the next couple hours researching for the following day’s trades.

Tips From Experienced Day Traders

While you can experience extremely profitable individual days early on, prolonged success takes practice and experience. To accelerate your chances of success, here are a few tips from seasoned penny stock day traders:

  • Don’t chase success stories -Experienced day traders are quick to point out the dangers of chasing penny stocks like they are lottery tickets. As a rule of thumb, avoid all emails and sales pitches claiming the next high growth stock is right in front of you. These are frequently pump and dump schemes in which current investors are looking to recoup losses before selling. Instead, focus on penny stocks that have a history of growth.
  • Don’t get greedy -The objective of day trading is to make quick transactions; however, many investors get greedy and lose the chance to make healthy returns. Once a penny stock has reached your target profit point, sell quickly.
  • Cut your losses -It’s impossible to hit the mark on every stock. When you’re wrong, it’s crucial that you quickly cut your losses and move on. Staying with a losing stock too long can put you in a deeper hole.
  • Stay positive -You’re going to lose money on certain investments, but don’t forget about your successes. Over time, talented day traders will hit the mark more than they miss it. Staying positive and well-grounded will enable you to invest with the confidence that’s required to succeed.
  • Take notes -The best day traders keep journals or diaries to track patterns, remember successful strategies, and document mistakes. However you do it is up to your own taste and preference, but some sort of note taking is advised.
  • Predictable isn’t boring -Many investors get into day trading for the excitement and adrenaline rush it brings. While this is certainly some of the allure, you can’t afford to get caught up chasing outlandish profits. Sometimes predictable penny stocks offer the best opportunity for profit. Focus on predictable gains, while occasionally taking a shot on riskier stocks.
  • Develop rules -Without a guiding force telling you when to buy and sell, it’s easy to let emotions dictate your transactions. To avoid this mistake, develop a list of preset rules that you follow at all times. This will keep you grounded when you’re not sure of what to do.

Day trading penny stocks is challenging, but it also offers an exciting and rewarding opportunity for high growth returns. By educating yourself on the process and following the advice of seasoned day traders, you can find success.

Profitably Yours,

Penny Stock Research

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Category: Investing in Penny Stocks

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